10 steps to become a Better Trader

How to Become a Better Trader?

BETTER TRADER

Better Trader: Anyone who wishes to learn how to become a better trader can accomplish that goal if they are willing to get the proper education and put forth the effort to practice and follow directions. While the learning process is different for everyone, depending on their experience and expertise, here are 10 steps that can lead to becoming a better trader.

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The Elements of a Trading Plan

The Elements of a Trading Plan
(A primer)

Elements of Trading plan

Trading is an exciting and incredible world. It is also the world in which money flows easily and, considering that the majority of people lose money, it must mean that the money flows away from the majority to the few. In this world of excitement, it is very easy to either go broke or at least lose all your trading account.

The four elements of a complete Trading Plan

In general, there are four key elements to a successful trading plan.

1. An overall strategy for the management and control of your money

2. A method of determining entry level

3. A method for determining an exit level

4. Stop Loss / Profit levels

Intertwined with these key areas is an in-depth understanding of why it is that you trade. So maybe, before we move on to look at each of these key points, you could ask yourself three questions.
Why do I trade?
Can I afford to trade?
What do I expect to get from trading?

Some people are gamblers, some trade for entertainment and excitement, some do it for a living to put food on the table for their family, while others use trading to relieve emotional and psychological pressures. Very, very few actually trade to buy private jets and Porsche!
Your trading plan is a very personal document. It has to suit you. It has to suit your financial profile and enthusiasm for risk. It has to be YOUR TRADING PLAN.

Key 1
An overall strategy for management and control of your money

What markets do you want to trade? What is the size of the margins? How many options can I buy for $X? These are the common questions which many would-be traders ask when they first start out. And as most people starting out on a new journey, they are asking all the wrong questions.

Anthony Robbins, of Awaken The Giant Within fame, says that the quality of our life is determined by the quality of the questions we ask. Maybe what we need to do first is find out what the best questions are to ask. Often people are surprised when they consider the questions I am about to raise?
How much money do you have to put into this venture? (This is the easiest one)

  • What portion is it of your net worth? (It needs to be a small percentage)
  • How much money could you lose in one event and still feel okay about yourself and your plan? (Because trading is all about learning how to take losses)
  • Are you aware that you are setting up a business? (Because you are)
  • Where have you sought advice to date in developing your own trading plan?
  • When do you intend to start? (Certainly not until after your education is underway)
  • What education have you undertaken to help you in your trading? (Many of life’s skills may help or hinder. You need to learn a great deal about trading before you call a broker)
    There are many more pertinent questions that need to be asked but these will suffice for the moment to indicate that trading is a serious business which involves a great deal of learning. Losing trades must be viewed as learning experiences, especially the expensive ones.
    All things considered, I would hope that it is becoming apparent that trading education is appearing to be a wise investment

Often early lessons, formerly called losses, need to be reviewed and explained so that the underlying, and seemingly obscure lessons about market emotions and market action can be understood. In some of these cases, you may have learned a lot but paid a higher than necessary price.

Key 2
A method of determining entry levels

Your approach for determining entry levels also needs to include a process for selecting a market sector, stock, commodity or futures contract. Whether you feel the indicator ADX is better than triple moving averages is for you to determine. But you must determine it for yourself in the market sectors you want to trade.

Currencies, equities, and futures all have their own idiosyncrasies which may have an effect on your trading style. So might your personal knowledge. For example, while ‘mineral’ people know a lot about minerals and mineral markets, they probably know little about IT high tech areas.

It has often been said that Technical Analysis is about probability. You need to satisfy yourself that the statistics being bandied about work for you in your market.

Remember the quality of the analysis depends on the quality of your questions. Although, initially, any questions will do, as long as you do ask and then seek the answers. In time you will develop a feel for improving the quality of your questions. Continue reading “The Elements of a Trading Plan”

Three ingredients of Successful trading

Successful trading

Successful Trading is dependent on three Ingredients:

Successful trading relies on the perfect mix of three key ingredients for each unique individual. With so many permutations and combinations, the number of possibilities is as varied as there are people thinking about trading

Through a process of continually refining and exploring these three key elements, it is possible to increase your profit potential in trading.

Trading Psychology

Acclaimed and successful traders, Ray Barros, Daryl Guppy and Ray Kelly all say that the most important aspect of trading is understanding the psychology of both yourself and the market. The Trading Plan Review can introduce you to these and other successful trading philosophies and attitudes.

When people look at a chart of prices or market action, novices often think they are only looking at a graph or record of prices that were traded. The reality is that behind every sale, every price move, there are the emotions which drove people to decide to buy, sell or stay out of the market.

Trading is all about understanding crowd dynamics. Speculating on what crowds will do next. Some feel that market movements are random, displaying no pattern or predictable behavior. Others feel that crowds of traders behave in very predictable ways. Predictable to the point of being profitable.

Another aspect of Trading Psychology is learning about your own motives for trading. If it is pure to make money, then you will find this profession stressful and devoid of pleasure. With this mindset, your chance of trading success will be very low

In the same way that a tip is a reward for good service in a restaurant, in trading, profits are the reward for trading success. Focusing on making money alone will often see novice traders closing out winning trades too early and allowing losing ones to become poor ‘long-term investments.’ You have to learn to enjoy the analysis and the challenge.

Successful Trader, learn to know thyself…!!

Sound Money Management

With good money management, profits can be increased by a factor of ten, or so the super and successful traders say. If we could help you turn every dollar you earn into 10 more, then do you think it would be worth giving us a call?

It has been demonstrated in numerous studies that it doesn’t matter where you get into the market. Profits from successful trading come from, firstly, wise money management in deciding how much to invest in each trade, and secondly, managing your profits as they build.

There is no such thing as playing with the market’s money. Once you are in profit, it is your profit!

The Trading Plan

Often viewed as the most important aspect of successful trading, the trading plan is actually the least important of the three keys.

Don’t get me wrong. A trading plan, with an edge, as an essential key element in any successful approach to trading. With us, you can learn the five keys to developing a successful trading plan. Consider the trading process similar to a bike chain where the trading plan represents 10 of the hundred links in the chain. It doesn’t matter how good or bad the other links are, a faulty link anywhere in the chain will stop all of it from working. A strong link cannot cover for a poor one elsewhere in the chain.

With this thought in mind, at least in the short term, any plan is better than no plan at all.

Plans with consistent profit returns and small drawdowns are possible. BUT you will find that you cannot simply take, borrow or buy another person’s plan and trade it. Every trader will add variations because they feel that those refinements give them an edge or add to their existing edge. The variations may also be added due to personal preferences or money management considerations.

Therefore, your Trading Plan becomes a reflection of your own personality and attitudes towards risk, fair profits and your ability to do the required research, whether it is fundamental or technical.Being aware of this trading plan design characteristic is a further key aspect of developing a sound trading plan. And this takes us all back to the arena of Trading Psychology.

Additional Tools required for successful trading are:

Whether you are a day trader or a long-term investor, you need to have a few things in your tool-kit that will help to choose winning trades. A reliable broker is an important factor. You can find online brokers that let you do all of your decision-making yourself and pay very low commissions, or, if you need a little more professional support, you can sign up with a full-service broker that charges a lot more but gives you personal service. But, obtaining a reliable broker is not the primary tool in your trading toolkit.

The first tool you need in order to trade profitably is your own personal investment education. It’s a good investment in your trading future to pay now for some good investment and trading education courses so you can establish a workable approach to trading in your particular market.

You will also require an excellent source of market information in order to invest or trade effectively. If you are day trading, you need real-time charts with price data and accompanying indicators so you can monitor the markets throughout the day and use them to make your trading decisions. If you are a longer term investor, you will probably still want a source of charts, but they do not necessarily have to update in real time since you will most likely be making your investment decisions outside normal market hours.

A good source of market fundamentals research is crucial for both fundamental and technical traders. It is a good idea to find an independent researcher to supply you with information who is not financially tied to promoting any particular company or industry.

With the right trading tools in your kit, you will be well on your way to trading profitably. Always be aware that trading involves the chance of loss and there are no assurances that any trading approach will always be a winner. Manage your risk wisely, trade judiciously, and you can reach your goals.

Summary

Your best investment is education. It is wiser and cheaper to spend a few hundred, or better, a few thousand dollars on good books and seminars than lose the same dollars on a bad trade. Allow us with the Trading Plan Review to help you get your library of knowledge started.

Remember, knowledge with action is power!

Massive action is even more powerful!

Why Have a Trading Plan?

why have a trading plan

Why Have a Trading Plan?

 

The reason people are encouraged to have a trading plan is so that they have an increased chance of making money out of trading. Purely acting on uninformed hunches and what the taxi driver suggested may work occasionally, but in the long term this approach will send
you broke.

Trading can be exciting. It can be fun. It can also be very stressful. A Trading Plan, well written and strictly followed, will possibly make trading a little less exciting, a lot more structured and will reduce stress.

If these considerations are important to you, then read on.

The one aspect that separates amateurs and professionals in any field of endeavor is that professionals, especially successful ones, always have a process which they strictly follow.

Before you leap into the arena of trading, let’s just spend a moment on considering some of the harsh realities.

Chilling Facts

Most private traders lose money trading the financial markets, especially futures. Discovering why could be your first step to trading success.

A recent survey showed that more that 70% of active traders do not have a detailed, written trading plan encompassing:

  • Market analysis
  • Entry methods
  • Exit methods
  • Money management
  • Progressive financial situation review

This means most market participants can’t, or simply don’t, make disciplined trading decisions to take advantage of various market opportunities as they appear.
The survey also showed that those without a plan generally suffered from

  • Overtrading
  • Trades becoming ‘investments’
  • Gambling on hunches
  • Not making their own decisions
  • Not taking responsibility for their actions

Maybe you recognize yourself in this list?
If you know that your approach to trading has room for improvement, then we can help. If you don’t have a formalized, written trading plan, with an edge, then I know we have something to offer.

How to treat a losing trade?

You have to cut your losing trade asap

losing trade
Do you think your family and friends (assume they are not traders like you) will understand you when you tell them that the first thing a trader learns is how to lose money. Aka cuts, losing trade? Would they confiscate your trading stake if you tell them something like Sweetie, I am so happy today because I just lost 500 dollars by selling Stock XYZ 10 minutes ago. They perhaps would! They would also think you are nuts and a saboteur sent by some evil spirit to destroy the family financial order. The next thing they think is that you need to see a shrink.

Yeah, I know it is painful to watch a stop loss order kick in, take out your position and show a red number in your account. You can twitch, squirm, whine or bang your head against the wall or anything but remove your stop loss orders. And this rule is THE most important since one big losing trade will totally knock you out cold and you will perhaps NEVER recover from that one single big loss. It is more important than riding winners, which is second most important in trading/investing. Riding winners is much harder than cutting losers. We will talk about it in the future. Here are 2 real world examples that might help imprint this rule in your head permanently.

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free stock quote

The convenience of a free stock quote is it immediately gives you the latest price of your stock being traded. If you’re an active stock trader, free stock quotes are deemed a necessity. After all, to generate a profit, you need to control your costs. Stock quotes are provided by financial sites and stock brokers. In addition to giving free stock quotes, a good stockbroker needs to be competitive on commission pricing and have a reliable stock order system.
Getting a free stock quote is just one ingredient to making money from trading stocks.

You need to access to information which gives you insight on stocks that are ready to breakout on the upside. This entails becoming familiar with the company’s business, the industry it competes in and its financial standing relative to its peers. The key to generating good investment returns is recognizing the stock purchasing opportunity before the rest of the investor crowd.

How Often To Get a free Stock Quote

Being updated on the last price dealt of the stock you’re following is part of being a stock investor. You want to know whether you were up or down from where you originally purchased the stock. Should it be once every hour, once a day, once a week or even every half hour? The answer depends on what type of stock investor or trader you are.

The Buy and Hold Investor

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Best Stocks to Buy

The best stocks to buy

Are the ones that have the best likelihood of going up. These best stocks tend to be well-managed companies, have strong balance sheets, higher sales and profits. The focus of these corporations is building shareholder value. Consistent growth in profit and market share is essential. The Best stocks for investing are based on solid business fundamentals.
best stocks
The best stocks are simply investment stakes in companies that make you money steadily over time. These are stocks that won’t keep you up at night wondering whether they’ll still be in business tomorrow. Low volatility and consistent returns are what is associated with these investment gems. Management in these companies treats their employees, clients, and shareholders with honesty and respect. To find a potentially good stock, these companies tend to have these following traits: Continue reading “Best Stocks to Buy”

Trading for living :How much capital is enough?

How much trading capital you need to do trading for Living.

A simple answer is the more, the better. Under capitalization is one of the major problems that traders have.  First of all,  trading is one of the most difficult professions on the earth due to its very high earning potentials. If you have a few thousands trying to make a living at it, then what I can tell you is that it is impossible. You need at least 7-8 Lakh (100K $ approx.), to even stand a chance to make a modest living if (a big if) you have the skills.

trading for living
Trading for living

For example, your objective is to make 3-4 Lakh per year consistently, which is 50% of your 7-8 Lakh. A 50% annual return year over year WITHOUT compounding is very hard to achieve even for the most experienced traders. With compounding, not even Warren Buffet could. I believe Warren Buffets track record is perhaps around 15%-20% minus management fees with compounding. The Madoff’s track record was around 10% compounding. You know why I mentioned Madoff here.  Stay away from anyone who claims something like that.

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Trade like a hunter and make a killing in stock markets

Trade like a hunter

 trade like a hunter
Trade like a hunter! Sometimes you can find inspiration from where you can never expect from.
There is a lot we can learn from some of the hunters – gatherers still thriving in the forests all around the globe. These people make their living off the jungle and they have no contact with the outside world. The Majority of the traders loves to trade alone. Traders follow their own unique style and every trader is different all over the world.
There are a number of animal species in their jungle, but they don’t waste their energy running around after each and everything they see, but they have a limited list of say 5 to 10 things on their menu and over the generations, they have perfected hunting into a kind science.Traders also cannot trade in each and every stock out there. Traders, understand and follow few stocks. They get used to volatility, the price action of those few stocks.

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